Chapter Thirty-two

The Shell Game

How did LaRouche get away with so flagrantly defying his creditors and violating federal campaign financing laws? How did he and his followers evade scrutiny by the IRS? To answer these questions, one must understand the financial structure that LaRouche has built to protect himself: an interlocking network of over thirty entities, seemingly independent of one another but actually controlled centrally through informal mechanisms. This business-political "empire" is an elaborate shell game. Cash is always in motion from one shell to another, disguising questionable transactions and avoiding court judgments. The entities include corporations, partnerships, individual NCLC members operating under business names, political action committees (PACs), electoral campaign committees, and the tax-exempt (until 1987) Fusion Energy Foundation. At any given moment the money in the bank accounts of these various entities has little to do with their actual operating receipts and expenditures. Funds are shifted around to meet the needs of the LaRouche organization as a whole. Considerable amounts sometimes will be in the personal bank accounts of trusted but appropriately obscure NCLC members. Large reserves are reportedly held in offshore banks where U.S. claimants and authorities cannot gain access. In the mid-1980s, there were well over one hundred bank accounts involved in these transactions in the United States alone, while LaRouche's European Labor Party had its own interlocking shells and cash was moved between the United States and Europe by courier,

At the center of this financial web sits an unincorporated political association, the National Caucus of Labor Committees (NCLC), of which LaRouche is the chairman. The NCLC has no assets, and keeps no bank accounts; in effect, it is judgment-proof. LaRouche controls it through a kind of politburo, the National Executive Committee, which meets almost every day. The most important financial decisions are made at these meetings, and LaRouche's approval is always required. Even when he is out of the country, he keeps in close daily communication.

To insulate LaRouche and prevent the entities from being liable for each other's debts, the NCLC denies any controlling role. Its leaders today describe it as merely a "philosophical association" which meets occasionally to discuss Plato's Timaeus and similar refined topics. But in 1974, LaRouche described it as a "vanguard political organization." And in 1976, the NCLC director of organization, Warren Hamerman, declared in a financial report that the "budget and deployment of funds" proceed from a unified strategy. His report used charts and figures to illustrate the flow of money to and from the various entities, including the nonprofit FEF. The NCLC's total resources, he said, are "centrally deployed internationally to achieve maximum concentrated political firepower."

From the beginning, all entities were headed by a tiny coterie of trusted LaRouche aides. The incorporators, officers, or directors usually included Nancy or Ed Spannaus and Kenneth or Molly Kronberg. Most entities shared the same offices, telephone switchboard, lawyers, computer services, bookkeepers, in-house payroll company, and printing and typesetting facilities. This made it extremely difficult for creditors of any entities to foreclose, unless their judgment was against several shells at once.

The personnel of the entities were as interchangeable as the equipment. Fundraisers would claim to be from the FEF one day and from Campaigner Publications or Caucus Distributors the next. The money that poured in rarely stayed in the account of the entity to which the check was made out. Indeed, weekly financial reports going back to the mid-1970s show the cash from all LaRouche's entities going into one kitty. Using CIA jargon, LaRouche referred to the NCLC's "proprietary" relationship to the entities. In a 1979 speech he called them the "predicates, the shadows, the footprints" of the NCLC. In a 1981 pamphlet he said the NCLC "participates as a 'mother’ or significantly as a 'partner’ component." The incorporation papers of Caucus Distributors, Inc.—the most successful of LaRouche’s telephone fund-raising entities—affirm outright that its purpose is to promote the "political ideas and beliefs" of the National Caucus of Labor Committees.

Some of the entities are just fancy names for the NCLC's own internal sectors. For instance, New Solidarity International Press Service, Inc., is the NCLC intelligence sector in its guise as a commercial producer of intelligence in published form or as confidential reports for private clients.

Businesses run by NCLC members are expected to put the NCLC's needs first. Former LaRouchian Eric Lerner found this out when he and several comrades formed a company to promote a water desalinization invention. After leaving the NCLC, he stated in a 1979 lawsuit that NCLC leaders had pressured him to funnel the firm's profits to the U.S. Labor Party, the electoral arm of the NCLC, in violation of election laws. Lerner charged that this was standard policy with other NCLC-controlled businesses.

The practice extended to the nonprofit FEF with its multimillion-dollar annual revenues. Bank records show that in the early 1980s the FEF transferred large amounts to several profit-making LaRouche entities. Many large checks were simply made out to "cash."

The NCLC's policy of keeping no assets in its own name dates back to 1978, when a $90,000 judgment against the NCLC was obtained by the Bank of Nova Scotia, The NCLC simply shut down its accounts and transferred its assets to controlled entities. An NCLC internal memo boasted that these assets had gone ''underground."

LaRouche handles his personal finances in the same way. He holds no property in his own name, maintains no personal bank accounts within the United States, and receives no salary, ostensibly living off the charity of his followers. His residences are always owned or rented by associates, so that he appears to be a guest in his own house. In 1984 he testified in a lawsuit that he hadn't paid a penny in income tax for twelve years, and had no idea who paid for his food, clothing, attorneys, and other necessities. "I have not made a purchase of anything greater than a five-dollar haircut in the last ten years," he said.

LaRouche's attorney, Odin Anderson, claimed that in living this way LaRouche was following the example of Mahatma Gandhi. In the early 1970s, when "Lyn Marcus" the Marxist ideologue lived in a small, rundown apartment, the comparison would not have been so absurd. But LaRouche's standard of comfort changed dramatically after he married Helga Zepp. The Sutton Place town house, a villa in Germany, hired bodyguards, armored limousines, and frequent world travel all became necessities. Anne-Marie Vidal recalled the resentment that Helga's shopping sprees stirred up among NCLC women: "She'd put down more for a blouse than most members would spend on clothes in a year."

After Ronald Reagan became President, LaRouche and his top lieutenants discussed moving the organization to the Washington area. The first stage came in 1983, when LaRouche, Helga, and several top aides moved to the vicinity of Leesburg, Virginia, an affluent community thirty minutes from Washington in Loudoun County (fox-hunting country). They rented an estate with a three-story house and a barn for Helga's horse.

Moving hundreds of NCLC members and the national office to Virginia required massive sums. Homes and office space had to be found. Real estate had to be purchased as well as rented. All this coincided with LaRouche's 1984 presidential campaign, which included lavish plans for television advertising.

To cope with the heavier demands, the NCLC fundraising system was reorganized in the spring of 1984. Until that time, fund raising had been left largely to the regional NCLC organizations. It was henceforth centralized at the national headquarters' telephone banks. Scores of NCLC intelligence and editorial staffers were reassigned to full-time fundraising. Anyone who balked was accused of elitism. A California NCLC leader, William Wertz, was brought in to oversee the revamped system.

According to federal court testimony, Wertz's philosophy was simple: There was no such thing as a loan, and money borrowed should not be repaid. An exception might occasionally be made for lenders who were politically important or threatened to launch a major legal battle. But that was for the NCLC leadership to decide. The rank-and-file fundraisers were expected to get on their assigned phones, work through their stacks of contact cards, and milk the lenders at top speed.

Soon the phones were being worked fourteen to sixteen hours a day by as many as 120 people in the national office and upwards of 300 people in the regional offices. Telephone fundraising became "the one and only activity for which people lived and breathed," according to federal witness Charles Tate, himself a former fundraiser. New York regional NCLC leader Phil Rubinstein supervised a telephone operation that floated like a crap game from apartment to apartment in upper Manhattan, the Bronx, and New Jersey, leaving a trail of victims, (While involved in this, Rubinstein ran for mayor of New York in the 1985 Democratic primary, promising to weed out corruption,)

The national office boiler room developed a boot-camp atmosphere. "There'd be a roll call in the morning," Tate said. "Wertz would call out each name. You were given these gargantuan quotas, and you were expected to work from 9 A.M. until you met the quota, even if that was eleven or twelve at night," Members who didn't meet their quotas were yelled at, denied any days off, or accused of homosexuality or drunkenness. When one party leader's wife failed to meet her quota, her husband beat her up. It worked—she became the most ruthless of fundraisers.

Wertz interrupted work twice a day for pep talks. "He would describe us as being like Patton's army," Tate testified. "If we didn't make the landing like at Normandy...all of civilization would come tumbling down." (Wertz also concocted little motivational poems, such as: ''Here's to St. Martin, the Roman, who offered his cloak to a beggar...." In a harsher frame of mind he wrote: "Armageddon is coming...if thou fail'st to act as the right arm of the Lord." And: "Killer instinct is needed in him who would wage righteous warfare...kill with the weapons of art.")

According to federal investigators, the LaRouche organization's income soared to more than $30 million in 1984. During a four-month period a single Manhattan bank account of Campaigner Publications handled credits of more than $4.5 million. This was only one of many Campaigner accounts, and Campaigner was only one of many fund-raising entities. Although a substantial portion of the revenues came from legitimate literature sales or donations, investigators say that a larger amount was the result of two intertwined scams: unauthorized charges to credit cards (there were thousands of such charges) and the solicitation of loans which the NCLC had no intention of repaying.

Whenever airport travelers purchased literature or made a donation to the FEF or LaRouche's presidential campaign via credit card, they allegedly were at risk of additional, unauthorized charges. There was an art behind this, according to records in a suit filed by a bank against the LaRouchians. A fundraiser in the LaRouche boiler room would phone the National Data Corporation to verify how much could be charged. When told the requested charges exceeded the cardholder's credit limit, the fundraiser would call back requesting a lower charge, and repeat this process until the cardholder's credit limit was determined. The fundraiser would then decide how much to rip off, perhaps a small amount that might go unnoticed by the cardholder, or sometimes an amount that would clean out the account.

When the victim discovered the loss on his monthly statement, one of two things would happen. Sometimes the LaRouchians would apologize profusely, blaming it on a clerical error, and eventually return the money, having enjoyed an interest-free short-term loan. But more often, having withdrawn the cash through one of many LaRouchian credit-card merchant accounts, they stonewalled both the bank and the credit-card holder. Ultimately the bank would gel fed up and freeze the merchant account, but the money in it would total only a fraction of the unauthorized charges. The bank would be out the difference.

Two banks hit hard were Chemical Bank and New Jersey's First Fidelity. After they froze the LaRouchian accounts they were sued for allegedly being part of a political conspiracy against LaRouche. First Fidelity eventually spent more on legal expenses than it would have lost by writing off the debt. In New Jersey, LaRouche's harassment machine went into high gear, with press conferences and hundreds of thousands of leaflets calling First Fidelity a Mafia money laundry. The bank responded with a federal court racketeering suit against LaRouche, twenty-one associates, and twenty organizations. (The suit, eventually settled out of court, produced detailed information about LaRouche's financial empire.)

Vendors who suffered included Sans Souci Travel in New York City. The LaRouchians paid for airline tickets via unauthorized charges to the American Express cards of people who had previously made donations or purchases. When these people protested, American Express invalidated the charges, for a loss to the travel agent amounting to $106,000.

Thousands of 1984 loans were solicited through LaRouche's two presidential campaign committees, which spent a total of $6.3 million. The FEC filings of Independent Democrats for LaRouche (IDL) listed almost 2,600 loans totaling over $1.2 million. By October 1985 almost all these loans were past due, and only $139,000 had been paid back. An FEC official described this as "highly unusual—I don't recall anything quite like it in any other filing." As of mid-1987 LaRouche's campaign debts totaled $2.6 million, more than any of the major 1984 candidates except John Glenn.

Additional loans were solicited in the name of Caucus Distributors, Campaigner Publications, and the FEF. Fund-raising quotas were set at $400,000 a week in 1984, and then were upped to $500,000 and $600,000 in 1985 and 1986. Fundraisers increasingly targeted the most vulnerable people they could find—elderly widows living alone, stroke victims, and terminal cancer patients.